Ashvin Desai, an offshore account taxpayer, was previously convicted for concealing more than $ 8 million in foreign bank accounts. Last week, he was sentenced by U.S. District Judge Edward J. Davila to six months in prison and six months and one day of home confinement.

Desai was a medical device manufacturer who failed to report his family’s foreign bank accounts on tax returns and FBARs. These accounts generated more than $ 1.2 million in interest income between 2007 and 2009. He was indicted on several criminal charges, including tax evasion, tax perjury, and willful failure to file a FBAR.

Desai pleaded not guilty and went to trial. According to the evidence presented at trial, Desai controlled several foreign bank accounts at HSBC in India and Dubai, including accounts held in the name of his wife and adult children.

Desai used the money from these accounts to invest in certificates of deposit, which earned interest at rates as high as nine percent.  When it came to funding the account, Desai engaged in the textbook tax evasion scheme of mailing checks from the United States and transferring money from other undisclosed bank accounts in Singapore and the United Kingdom to his family’s accounts in India.  Desai also sold medical devices abroad, and, on at least one occasion, instructed a customer to wire funds directly to his undisclosed HSBC India account.

Between 2007 and 2009, Desai paid approximately $17,000 in taxes.  In reality, however, Desai owed approximately $375,000 in taxes to the IRS on his unreported interest income.  To make matters worse, Desai’s deposits into his foreign accounts far exceeded the income he disclosed on his tax returns each year.  For example, in 2008, he deposited nearly $1.1 million into his foreign accounts while reporting only $115,810.91 of income on his tax return.

The government’s evidence showed how far Desai was willing to go to conceal his family’s foreign accounts from the government.  In yet another example of a firm badge of fraud, Desai instructed the bank not to mail bank statements to his home.  In fact, the government had a “smoking gun” in the form of an email that he authored to establish that fact. In that email, Desai asked an HSBC banker, “Why are all the statements coming to Home address?  I thought we had a different arrangement.”

As if things were not bad enough for Desai, they got even worse in the weeks leading up to his sentencing. He was notified by the IRS that he had been assessed a whopping $ 14,229,744 FBAR penalty.

For as unfortunate as Desai’s situation sounds, he actually dodged a huge bullet at sentencing. For a defendant who forced the government to prove its case at trial, rather than plead guilty, Desai got off with little more than a slap on the wrist. Indeed, Desai faced up to 552 months in prison if convicted.[i]

While many might attribute this to a stroke of luck or to some pixy dust that Desai was sprinkled with before “walking the plank” into court last week, nothing could be farther from the truth. Credit must be given where it is due. While Mr. Desai may have lost at trial, the fact remains that his attorney achieved a nearly impossible result – a period of incarceration following a trial conviction that was significantly less than what he would otherwise have received if he had waived his right to go to trial and pleaded guilty. And for that, Desai has his attorney to thank.

In light of the fact that the highest balance of the offshore account was nearly $8 million and the reported FBAR penalty exceeded $14 million, two things can be assumed. First, that the IRS asserted multi-year willful penalties. And second, that Desai did not pay.  In what would be an ironic twist to this case, not to mention the continuation of an ongoing saga that is as colorful as the Hatfields and the McCoys, Desai might dispute the FBAR assessment. On what grounds would he attack this onerous penalty? None other than that it violated his constitutional rights under the Excessive Fines Clause.

However, before relying on this argument as inspiration to open up a battle on a new front, Desai should first read the fine print pertaining to FBAR penalties on the IRS website. Not only do the facts of his case appear to be worse than Zerner’s, but based on recent statistics of taxpayers who have pleaded guilty to willfully failing to file FBARs and who have subsequently been assessed FBAR penalties, a maximum FBAR penalty of 50% in the single high year is nothing extraordinary.

Finally, a couple of observations pertaining to badges of fraud. Recall that Desai funded the offshore accounts by mailing checks.  Of course, had he wired the money from U.S. banks, a compelling argument could have been made that he was fully transparent, having used the banking system to transfer these funds and paying the transaction fees associated with that service.  Instead, Desai chose a stealth way to fund the offshore accounts, resulting in yet another check mark in the column marked, “badges of fraud.”  That did nothing to help his case for willfulness.

By now, it should be clear to everyone, even someone who has just crawled out from under a rock and who has never stroked the keys of a keyboard, how serious the consequences are of using email to share sensitive information – especially when the recipient just so happens to be the enabler.  While you might be tempted to compose such an email, be reminded of the “smoking gun” email in the prosecution of Desai.

Granted, this advice might be a little late, but it raises an important point. Taxpayers considering opting out and certifying non-willfulness should review the trail of emails that were sent to bank personnel at the financial institutions where they kept their offshore accounts. These emails have a mysterious way of being resurrected, even after they’ve been deleted, and making their way into the Government’s hands.

[i] Desai’s maximum prison sentence was high because each FBAR count carried a maximum period of incarceration of 10 years. Normally, the maximum sentence for willfully failing to file an FBAR is 5 years in prison. Section 5322(a). However, willfully failing to file an FBAR while “violating another law of the United States or as part of a pattern of illegal activity involving more than $100,000 in a 12 month period” enhances the maximum sentence from five to ten years in prison. Presumably, that is what the indictment alleged.